The latest data from the central bank sheds light on the intricate dynamics of remittances in our country. Despite a slight dip in June and July, remittances have consistently hovered between $2.9 and $3.2 billion over the past three months. Although July witnessed a 5 per cent decline from the previous month, the year-on-year increase stands impressively at 48 per cent. The post-Eid ul Ezha slowdown has been identified as a contributing factor to this decline.
Furthermore, the sustained surge in remittances marks the fifth consecutive month where the inflow has surpassed $2.8 billion. This notable increase is a substantial leap from the monthly average of $2.3 billion in FY23 and much of FY24. The infusion of these funds has been instrumental in bolstering the current account, especially amidst normalizing repatriation outflows.
Several factors have been identified as propelling this growth in remittances. The stability of the domestic currency, driven by the decreasing gap between interbank and open market exchange rates, and reinforced foreign exchange regulations have been pivotal in encouraging a shift of remittances towards official channels.
A closer examination of country-wise inflows reveals intriguing trends. The UAE has emerged as a significant contributor, with remittances from the region nearly doubling year-on-year. Notably, the UAE’s share of total remittances has risen from 16 to 20 per cent. In particular, remittances from Dubai in July accounted for 16 per cent of the total inflows, reflecting an impressive 93 per cent year-on-year growth, possibly attributed to stricter controls on money laundering.
On the contrary, contributions from Saudi Arabia and the UK have remained steadfast at 25 and 15 per cent, respectively. However, the USA and the EU experienced a decline, with their shares falling to 10 and 12 per cent, respectively.
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The impact of this remittance growth on the country’s economy cannot be overstated. The resulting enhancement of economic fundamentals is reinforcing the confidence of expatriates. In FY24, remittances surged by 11 per cent year-on-year to $30.3 billion, setting an optimistic tone for FY25 with more workers expected to explore opportunities abroad. Nonetheless, potential disruptors to this positive trajectory include sustained low oil prices and a resurgence of currency exchange rate volatility.
In conclusion, the sustained resilience of remittances in the face of short-term fluctuations underscores their pivotal role in driving economic stability and bolstering confidence in the country’s financial landscape.
